Rational Idealist

The Strokes live at Stubb's March 14th night before SXSW. (Photo credit: Wikipedia)

let’s start with a quote from a friend Shane Snow:

I think being an entrepreneur is all about executing creative ideas — being the guy (or girl) who actually starts a band rather than sitting around with friends and talking about how cool it would be, or being the one who actually sits down and builds a prototype rather than just talking about it for years until someone else builds it.

from: read write web

there’s also a nice infrographic comparison of the rock band and the startup team, listing several similarities, like hard work, lot’s of persistence and luck, and ability to listen to the audience.

all of this is very true, and i find it more inspiring than a remark that another friend did once – “guys used to go to the army, now they go to startups.”

, an American music producer, composer and entrepreneur. (Photo credit: Wikipedia)

however, there is a role in entertainment business that is being under-estimated by everyone who never had to work in it – the producer.

In film and music industry, the producer is the one running the show, making decisions, including the decision on who will be ‘the boss’. producers know their ‘markets’, the mediums (film, music) and their ‘teams’ better than anyone. they are the one crucial component to the success, because they keep a neutral position and try to emphasize the best the team has to offer.

this is what an experienced CEO does, and something that an inexperienced first-time entrepreneur cannot do. at least not good or efficiently.

so where are the producers then? their role is being played by accelerators, business books, mentors/advisors/elders, but is it enough?

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Staffing is one of the most important aspects of company growth, and arguably most crucial factor in transformation of a startup into a stable company. The entrepreneur has to always know more than just who’s performing and who isn’t. The entrepreneur has to know who in the company is in the right place, who will be capable of managing teams as they grow, who has the capacity to see beyond the current state and will be pushing the company to the next level.

The evolution of a startup from staffing perspective is a repeating cycle of: (1) hiring people who see beyond the current state, (2) working hard and discovering the right way to incorporate their knowledge into your specific case, to streamline and optimize operations.

It’s really just these two focuses. And the CEO’s job is to always know where in the cycle the team is, what is the next milestone and what kind of talent will see over it.

In my company, Zemanta, I use a method to track our capacities, that shows me just that. It is implemented as a table (not spreadsheet), that maps persons (employees) into roles, according to their experiences.

I believe there is a rather fixed set of roles every company will eventually have to fill. It is probably even possible to formalize it to the point where you could predict the staff requirements based on desired yearly revenue.

Let’s take a look at an example evolution.

Startup company at inception

A typical tech startup might begin with a simple structure: business and tech co-founders. Their capacity matrix will be simple, but overwhelming:

It shows us two founders performing all business tasks with no external help. Note that capacity is not the same as performance. Performance will be based on many external factors, but dependent on time the particular employee has. In the presented case, both founders are severely over-stretched, and can perform reasonably well in just one or two roles, while the rest will be on back-burner.

Most important in this stage is that the founders have senior capacity in leadership. Everything else will be in flux, but without this they will never be able to attract and direct additional team members.

If the company has this kind of capacity matrix, it will inevitably be a technology and product company with good public recognition but poor business performance. Main challenge and milestone in this stage will be attracting early clients or investors, that will enable growing the team to really start working on the services/products.

And the competence matrix tells us that the only way to do this transition successfully will be to find some help for the founders to do things right…

Seed stage – proving the product

Where it will go from there really depends on specifics of the business. For instance, one of the first actions might be outsourcing:

Company in this stage can afford some to spend some money on making the core team more efficient, but the flexibility of working with outside help is much appreciated, since you are still proving that the work has long-term sense. Depending on the type of product you might invest in limited number of developers.

Company’s main focus is still on product and partly marketing and business development. Key milestone to reach will be implementing key metrics that will demonstrate commercial value of the service/product and inventing the specifics of the revenue model.

The competence matrix suggests that the only way to reach next stage will be acquiring knowledge/experience/people in business side – at the end of seed stage, the company is severely over-resourced on product and technology side.

Growth – stability and focus on sales

Next might be professionalizing the development part, by hiring full time staff and possibly even engineering lead, and finding seasoned sales person to kickstart the pipeline:

Now, a year in, we have a decently operational company, that is starting to generate revenue, the founders can focus on monitoring the changes in the competitive landscape and the CEO’s job for the next few months (years) will be making sure the roles are performed optimally.

Company becomes sales-oriented and is all about implementing the revenue model, where VP Sales is the key person that will have to overlook, improve, do all the hard work and earn his own staff.

The Sustainable Company

The ultimate state every company should strive for, the state where company works as a stand-alone system is something like:

At this time, every role has a senior manager, reporting to seasoned CEO. Everyone has well defined job descriptions and knows their role in the mechanism.

Most companies never get to this stage – they either stop growing at earlier stages, fail or get acquired. My thesis is that those that fail do so because they fail to find the people that could take them to the next level when timing is right.

Conclusion

We’ve followed a path of a fictional company on the path from idea to professional organization, which was really a process of converting inspiration into experiences. As the company’s focus moves from proving the idea, building the product, implementing the revenue model to stabilizing all aspects of operation, the right staffing will be the key driver of those transitions.

Quite possibly I’ve missed some other important roles. But I hope I managed to convey the main points:

• CEO’s job is figuring out the details of the path between initial state (first table) and final goal (last table)
• the areas you need top performance should have dedicated personnel, ideally seasoned
• this same method can also be used to evaluate staffing in any sub-department

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